Most-bought investments: May 2022

Investors are reacting positively to the global relief rally but are ultimately divided, with those taking risk off the table and others attempting to ‘buy low’.

• UK heavyweights such as Lloyds, Rolls-Royce, Legal & General, Aviva and Glencore retained their spots on the most-bought list of stocks on the interactive investor platform in May
• The 10 most-popular funds and investment trusts among ii customers has changed markedly over the past year
• Passive funds remain popular with ii customers – securing seven spots in the top 10 most-bought funds in May

Market comment: a global relief rally

After a difficult April, there appears to have been more optimism in markets during the month of May, particularly within the second half of the month. The FTSE 100, for example, which went down at the very start of the month, has been on an upward trajectory since the 10th of May.

There are many factors which are driving the more positive momentum in markets; some of this is likely to be attributed to investors who are ‘buying the dip’ – after many stocks have suffered significant losses in previous months. More broadly, the news of covid restrictions easing in Shanghai, a crucial financial and trading centre globally, is also likely to have driven more optimism in the markets.

RichardHunter, Head of Markets at interactive investor, adds: “The relief rally has taken to the global stage, as investors mull the possibility of an economic return to form. Early gains are broad based, tending to reflect those stocks which have been the subject of selling pressure given the economic outlook. Risks unquestionably remain, and there are further challenges in plain sight, but for the moment investors are reacting positively to the latest developments.”

Direct equities in detail

Commenting on the most-bought equities on ii in May, Victoria Scholar, Head of Investment, interactive investor, says: “UK heavyweights such as Lloyds, Rolls-Royce, Legal & General, Aviva and Glencore retained their spots on the most-bought list of stocks on the interactive investor platform in May. Tesla also continues to be among the most popular companies with the addition of Apple amid more positive price action for the stock in the second half of the month, as US equities finally snapped their eight-week losing streak.

“British Airways’ parent company IAG entered the most-bought list in May, likely driven by its first-quarter earnings announcement at the start of the month, which sent shares sharply lower on the day attracting some opportunistic buyers. 

“Woodbois entered the list of most-popular purchases among ii customers in May after a sharp sell-off in the first half of the month saw some investors pick up this stock at a discount.”

Keith Bowman, Senior Equity Analyst, interactive investor, adds: “A 2% fall in the Nasdaq Composite index and a near 6% fall in the price of Apple shares over May provided investors with a potential buying opportunity. Despite plans for flat iPhone production over 2022 in the face of inflation constrained consumer demand, faith in the tech giant’s long-term ability to prosper appears to persist.

“Tesla shares fell nearly 13% over the month as its head, Elon Musk, continued to grapple with a potential purchase of Twitter. The recent easing in Chinese Covid restrictions is likely fuelling investor hopes for future Tesla production as its new plant in Germany also kicks in.

“A broadly upbeat AGM at Rolls-Royce during May helped its shares climb 4%, with investors staying hopeful of a recovery from the pandemic.

“Elsewhere, robust first quarter lending activity reported at Lloyds Bank helped investors remain optimistic. Dividend yields of over 6% at both Legal & General and Aviva continue to leave their shares attractive to income seekers.”

Investment trusts and funds in detail

Commenting on the most-bought funds and trusts, Kyle Caldwell, Collectives Specialist, interactive investor, explains: “There’s a real divide at the moment – with some investors taking risk off the table and others attempting to ‘buy low.’

“This time last year, the prospect of a market rotation playing out following the rollout of the Covid-19 vaccines in November 2020 started to run out of steam, with investors switching back to high growth shares, including technology companies, which have been the place to be for much of the past decade.

“However, this time around the rally for value shares may have legs because the big driver that has increased demand for such companies has been the tightening of monetary policy by central bankers. This backdrop is more favourable for value shares, as their valuations are more reflective of their current earnings.

“In contrast, growth shares, particularly tech companies, carry expensive valuations that are based on expectations of high profits in the future. Such valuations are devalued by increases in interest rates and high inflation, which has prompted falls in share prices for such companies over the past six months or so.

“In response, the top 10 most-popular funds and investment trusts among customers of interactive investor have changed markedly over the past year. Last May seven of the 20 were growth funds managed by Baillie Gifford, but now only two remain: Scottish Mortgage and Baillie Gifford American. The duo have both suffered steep losses so far in 2022, so investors buying now will be hoping a turnaround in fortunes is on the cards.

“Another trend is that passive funds have increased in popularity. There are seven passive funds in the top 10, up from four a year ago. To me, this reflects that investors are looking to ensure their portfolios are well-diversified, and to achieve this they are preferring the simplicity of passive fund.

“For investment trusts, it is interesting to see two trust specialists in the top 10: Greencoat UK Wind and Tritax Big Box REIT, the latter a new entry for May. Tritax Big Box REIT, which specialises in UK logistic assets, has seen its share price dip in recent weeks following Amazon’s announcement that it had overestimated on warehouse space, and is now scaling back. As a result, the trust’s hefty premium has fallen, which some investors have been taking advantage of. Those attempting to buy low will be doing so in the belief the warehouse success story of the pandemic will continue.

“Elsewhere, investor caution is reflected in our top 10 trusts by Ruffer Investment Company, Capital Gearing and Personal Assets retaining their places. The trio, which have, over the years, proven their worth as protectors of capital, are defensively positioned for a sustained period of high inflation.”

Top 10 most-bought investments on interactive investor in May 2022